RIYADH: Saudi Arabian Real Estate Financing Co. (Refco) said it plans to start offering home loans in the Kingdom in 2010 and wants to raise SR1 billion ($267 million) by selling shares to investors.
Refco was set up more than a decade ago by a group of Saudi real estate agents in anticipation of the government issuing a mortgage law, a move now expected this year.
The new law could open up home ownership to more of the 25 million population in the most-populous Gulf Arab country, less than a third of whom currently owns property. “We have been waiting for the mortgage law,” Khaled Al-Muguiren, a member of Refco’s founding assembly, told a shareholder gathering on Sunday.
Refco has hired US consultancy Clayton Holdings Inc. to assess the size of the Saudi housing market and create a business plan.
Clayton said it was working on exit strategies for the loans, including how to securitize the assets in a way that complied with Sharia. “The Saudi market is fundamentally underserved in terms of home financing,” Bruce Legan, Clayton’s president for consulting services, told Reuters.
Legan said the world’s top oil exporter had a housing deficit of 2 million residential units, a figure which was rising by 200,000 a year, and that home ownership stood at 30 percent, the lowest level among Gulf states.
A surge in construction costs in recent years, as well as a lack of bank financing tools and a dearth of state assistance have aggravated the housing deficit in Saudi Arabia.
Some Refco shareholders said it would be a good time to start operations because inflationary pressures had eased as both oil prices and building material costs slump. “You have two thirds of the population below the age of 30 and there is a shift in traditions, with less and less Saudis wanting to live and settle with their parents,” Legan said.
Refco will start with a paid-up capital of SR1 billion, of which SR600 million will come from the founding private investors and SR400 million from institutional investors, board member Abdul-Rahman Mazi told Reuters.
“The plan is to have a paid-up capital of SR2 billion. So once we start business we will raise SR1 billion through an IPO that will take place before 2012,” he said.
Once the law is in place, the Saudi mortgage finance industry could generate annual turnover of SR150 billion-SR180 billion, said Matthew Lind, a partner with Strategic Mortgage Finance Group Inc., which is also advising Refco.
Muguiren, meanwhile, said Refco would partner with a local bank to offer mortgages through an existing branch network.
